(Calgary) Canadian oil and gas companies plan to increase spending in 2023, but analysts believe it will still be another year of modest growth.
For the country’s energy industry, 2022 was ultimately the year that restored prosperity to this sector. With the lifting of health restrictions around the world, the war in Ukraine and the cumulative impact of years of underinvestment in oil and gas, energy prices have reached record highs in 2022, which at the same time allowed Canadian companies to generate record profits.
But most of that revenue has gone to paying down debt and rewarding shareholders, so it hasn’t been redirected to big construction or infrastructure projects. And even if commodity prices were to remain green in 2023, this trend should continue.
“Oil producers have become much more financially disciplined over the past six or eight years,” said IG Wealth Management chief investment strategist Philip Petursson. He said the threat of a recession in 2023 is one of the factors making companies hesitate before embarking on a spending spree.
“We know that in times of economic slowdown, the demand for oil drops,” recalls Mr. Petursson. So I think [les entreprises] will want to be a little more careful. »
In Alberta alone, in the first 10 months of 2022, crude oil production averaged 3.7 million barrels per day – an all-time high that was broken due to rising global demand, according to ATB Financial. .
High production in 2023
Experts expect production to be even higher in 2023. They make this prediction in light of previously published investment budgets and production forecasts from oil and gas companies.
Many companies were able to pay off large chunks of their debt in 2022, meaning they will have more cash next year if commodity prices stay around US$75 a barrel .
Additionally, the Trans Mountain pipeline expansion is expected to be completed by the end of the year, which will provide additional transportation capacity for oil companies and increase the potential for export growth.
The Canadian Association of Petroleum Producers also expects investment in natural gas and liquefied natural gas to increase in 2023.
Mr. Petursson even goes so far as to predict that Canadian oil production in 2023 will exceed the record set in 2022, but only by a hair.
“I think there will be a very small increase, because there are new projects that are currently under construction, he underlines. But I don’t think we’re going to go back to “pump, baby, pump” like in the past few years. »
Financial viability
In 2023, the industry will likely continue to focus on shareholder returns and maintaining the financial viability of their businesses. In addition to global economic uncertainty, Canada’s oil and gas sector faces increasingly aggressive greenhouse gas emission reduction targets. The federal government is currently in the process of developing a legislative cap on emissions from the sector, which the industry opposes.
Advantage Energy President and CEO Mike Belenkie says his company expects to grow at a rate of 10 to 12 percent over the next few years.
“We have probably never been in a stronger position than today. Our debt is very low, our production is increasing and our team is stable,” assures Mr. Belenkie.
But he blames recent federal government guidance — including the carbon pricing system — for forcing the industry as a whole to end the big-project era.
“Over the past decade, most businesses that were not in good shape had to close. And the companies that have remained are quite strong and have the ability to withstand a lot of volatility,” Belenkie believes.